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I'm a little confused when it comes to this whole business of wave 2 and 1 stealth on the new LT firmware
Can we use wave 2 and 1 games on live if we patch them to ssv2 ?
Does it even matter ? since these are games that M$ probably doesn't even check anymore?

As someone who might care about live and wants to use a hacked drive your job is to present the 360 with discs that look as close to originals (pressed media) as you possibly can. Naturally makers of burners and said pressed media got together and decided joe public did not need such capabilities and thus hackers now work to either bypass and/or fake real media by some method (we can have a discussion on hacking theory on another thread).

The 360 has a fairly formidable security system and you have now hit upon parts of it:

Security sectors- sectors embedded within the disc that are near impossible to reburn accurately (indeed every read will be slightly different which once again is usually how the scene knows if a game is a p2p repack).
Hacked firmwares work around this by ripping the sector values, stashing them on the disc image in known locations and repeating them on request of the security system- this was part of one of the theories of why bans happened last time around made even more interesting by a "remade timings engine" in LT.

Waves refer to a slightly varying disc layout courtesy of embedded system updates. At present there are 6. Naturally you want the one that goes with your disc in the first place and is one of the many reasons why wave patching is so frowned upon.

Back on topic there are 3 ways of ripping such sectors
1) With a Kreon drive (a set of commercially available DVD drives with a specially hacked firmware flashed to them). This gives SSv1 although it is somewhat more dubious for modern games- old games (namely your wave 1 and wave 2 era titles) were seen to have sectors at given angles which the drive itself could not measure properly so it fakes them. As ABGX360 says games with (un)intentional deviations from this at the mastering level will make the job of MS trying to detect you somewhat easier.

2) with a 0800 drive that is using a pre 1.6 firmware. This also produces SSv1 but a far better version of it apparently and while you can not tell it apart from Kreon SSv1 it should be OK (at the risk of a stern finger wagging aimed at me pre 1.6 0800 is pretty much SSv2 in all but name).

3) with a 0800 drive that uses a ixtreme 1.6 hacked firmware. This makes SSv2 which is the best we have- angles and sectors well within tolerances sort of thing.

Wave 1 and wave 2 era games correspond to early games and to our knowledge even a kreon SSv1 is OK for them (nobody has seen an old game that varies in this) and indeed there is an extremely good chance your SSv1 is good enough for most modern games as well. "Chances are" conflicts somewhat with mindset of the (justifiably) more paranoid among us hence SSv2 being highly suggested.

edit to answer the question from ganons- assuming of course a good SSv2 fileset no trouble at all.